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Why Is Semtech (SMTC) Down 21.5% Since Last Earnings Report?
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It has been about a month since the last earnings report for Semtech (SMTC - Free Report) . Shares have lost about 21.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Semtech due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Semtech Q4 Earnings Miss Estimates
Semtech Corporation’s fourth-quarter fiscal 2023 non-GAAP earnings of 47 cents per share missed the Zacks Consensus Estimate by 2.1%. The reported earnings decreased by 32.9% year over year.
Net sales of $167.5 million outpaced the Zacks Consensus Estimate of $150 million. The same decreased by 12.1% from the prior-year quarter’s level.
Macroeconomic headwinds, including export restrictions, inflationary pressure and supply-chain constraints, were overhangs for the company during the reported quarter.
Weak demand environments across the end markets were a major concern.
Nevertheless, positive contributions from the Sierra acquisition remained a tailwind. Notably, Sierra Wireless generated $15 million in sales post-acquisition in the fiscal fourth quarter, without which net sales would stand at $152.5 million.
For the fiscal fourth quarter, shipments to Asia, North America and Europe represented 68%, 13% and 19% of net sales, respectively.
Revenues by End Market
Net revenues from the infrastructure market represented 37% of its total revenues and exhibited a decline of 18% year over year.
Net revenues from the industrial market, constituting 40% of total net revenues, decreased 18% from the prior-year period’s level.
Net revenues from the high-end consumer market, which accounted for 23% of total revenues, declined 26% year over year. The high-end consumer market consists of mobile devices and other consumer systems, which accounted for 9% and 14% of market revenues, respectively.
Operating Results
Non-GAAP gross margin of 62.3% expanded 220 basis points (bps) from the last fiscal year’s quarterly figure.
Adjusted selling, general and administrative expenses for the fiscal fourth quarter decreased 15.6% to $28.8 million from the last fiscal year’s quarterly number. Adjusted product development and engineering expenses increased 9.7% from the year-ago quarter to $37.9 million.
The non-GAAP operating margin of 22.5% contracted 600 bps from the same quarter’s figure in the last fiscal year.
Balance Sheet and Cash Flow
As of Jan 29, 2022, cash and cash equivalents were $235.5 million, down from $617.8 million as of Oct 30, 2022.
Account receivables for the reported fiscal quarter were $161.7 million, up from $80.5 million in third-quarter fiscal 2023.
Long-term debt was $1.3 billion, significantly higher than $455.1 million in the previous fiscal quarter.
In the reported fiscal quarter, the company used $18.8 million in cash in operations compared with $18.2 million in cash it generated from operations in the fiscal third quarter. Free cash flow in the fiscal fourth quarter was an outflow of $24.5 million.
Guidance
For first-quarter fiscal 2024, management expects net sales of $230-$240 million.
The non-GAAP gross margin is expected to be 47.5-49.5%. Also, management projects SG&A expenses of $47-$49 million and research and development costs of $50-$52 million.
The non-GAAP loss per share is expected in the band of 11-4 cents.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -163.37% due to these changes.
VGM Scores
At this time, Semtech has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Semtech has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Semtech (SMTC) Down 21.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Semtech (SMTC - Free Report) . Shares have lost about 21.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Semtech due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Semtech Q4 Earnings Miss Estimates
Semtech Corporation’s fourth-quarter fiscal 2023 non-GAAP earnings of 47 cents per share missed the Zacks Consensus Estimate by 2.1%. The reported earnings decreased by 32.9% year over year.
Net sales of $167.5 million outpaced the Zacks Consensus Estimate of $150 million. The same decreased by 12.1% from the prior-year quarter’s level.
Macroeconomic headwinds, including export restrictions, inflationary pressure and supply-chain constraints, were overhangs for the company during the reported quarter.
Weak demand environments across the end markets were a major concern.
Nevertheless, positive contributions from the Sierra acquisition remained a tailwind. Notably, Sierra Wireless generated $15 million in sales post-acquisition in the fiscal fourth quarter, without which net sales would stand at $152.5 million.
For the fiscal fourth quarter, shipments to Asia, North America and Europe represented 68%, 13% and 19% of net sales, respectively.
Revenues by End Market
Net revenues from the infrastructure market represented 37% of its total revenues and exhibited a decline of 18% year over year.
Net revenues from the industrial market, constituting 40% of total net revenues, decreased 18% from the prior-year period’s level.
Net revenues from the high-end consumer market, which accounted for 23% of total revenues, declined 26% year over year. The high-end consumer market consists of mobile devices and other consumer systems, which accounted for 9% and 14% of market revenues, respectively.
Operating Results
Non-GAAP gross margin of 62.3% expanded 220 basis points (bps) from the last fiscal year’s quarterly figure.
Adjusted selling, general and administrative expenses for the fiscal fourth quarter decreased 15.6% to $28.8 million from the last fiscal year’s quarterly number. Adjusted product development and engineering expenses increased 9.7% from the year-ago quarter to $37.9 million.
The non-GAAP operating margin of 22.5% contracted 600 bps from the same quarter’s figure in the last fiscal year.
Balance Sheet and Cash Flow
As of Jan 29, 2022, cash and cash equivalents were $235.5 million, down from $617.8 million as of Oct 30, 2022.
Account receivables for the reported fiscal quarter were $161.7 million, up from $80.5 million in third-quarter fiscal 2023.
Long-term debt was $1.3 billion, significantly higher than $455.1 million in the previous fiscal quarter.
In the reported fiscal quarter, the company used $18.8 million in cash in operations compared with $18.2 million in cash it generated from operations in the fiscal third quarter. Free cash flow in the fiscal fourth quarter was an outflow of $24.5 million.
Guidance
For first-quarter fiscal 2024, management expects net sales of $230-$240 million.
The non-GAAP gross margin is expected to be 47.5-49.5%. Also, management projects SG&A expenses of $47-$49 million and research and development costs of $50-$52 million.
The non-GAAP loss per share is expected in the band of 11-4 cents.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -163.37% due to these changes.
VGM Scores
At this time, Semtech has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Semtech has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.